Profit and loss

To say selling in a recession is hard should elicit eye rolling and something sounding like "duh."

It seems organizations have taken one of two strategies to manage their revenue during the current economic downturn, an aggressive new business development campaign or a conservative "retention" strategy. The former works best for relatively new market entrants, but is unsustainable long term because the reduction in service or value is not enough to maintain clients won over on price. The former sort of works for established market participants; however, while an organization pursuing a "retention" strategy may keep current clients, they won't retain the same level of revenue.

Consider this example. A client who is currently worth $100 per year to your organization says they need to cut costs and may be considering the competition. At best, you can hope to keep that client at $80 per year, but reality is that client will probably be worth between $50-60. Already you are in a $40-50 hole from last year with one client no matter which direction you go.

I feel there are three simple things "retention" organizations can do to actually maintain or grow their revenue in a downturn.

1) Increase service for the same value - keep your client at $100, but offer $150 in services; ideally this is done proactively so your client doesn't have time to start casting about for different services, but may be a defensive move to counter a competitive attack. At first blush, this approach would appear to work best in high margin industries; however, the extra $50 in service could come from faster delivery time, increased maintenance or preferential access to new products.

2) Focus on the bottom 20% of your client base - when was the last time you spoke with the client bring in $5 per year? How many of your products do they buy? Do they even know you offer other products? That $5 per year client could turn into a $20 or $25 per year client with minimal effort on the part of your sales team.

3) Organic new business development - at the start of our example, your $100 per year client is now a $50-60 per year client, leaving a $40-50 hole to fill. You might be able to fill in some of that hole by following strategy #2; however, the only way to get back to net zero or positive revenue growth is to seek out organizations that aren't doing business with your organization. Yes, your competitors clients are the easiest place to start (how happy is their bottom 20%?); however, a quick rethink of how you position your services should open up at least one new target market for you to pursue.

"Blue ocean strategy" is on the way to being a business cliche, but the reason phrases become cliches is there was some truth to them once. Being the first to reposition your products into new a market forces your competitor to act defensively, allowing you to take your competitors' clients who are being ignored in your original market and make further plans for new business growth.

How is your organization attempting to maintain or grow in this economy?

Over qualified

One of the biggest reasons ideas fail to sell is because they are over qualified. Think of the times you have used or heard the following phrases at work.

"These are my thoughts, you can take them or leave them"

"Here's what I think, do what you will"

"Do what you will with my input"

"Its only my idea"

With the first three, what I do with the idea is flush it, usually before the individual is finished speaking. If someone can't own their thoughts, I have no interest in whatever comes after their qualifier.

With the last one, I want to jump up, grab the individual pitching and scream, "THAT'S GREAT! ITS ONLY YOUR IDEA! YOU DON'T HAVE TO SHARE CREDIT WITH ANYONE!" Fortunately for my colleagues and clients, I have restrained myself so far.

Instead of enhancing your idea pitch, qualifiers communicate your lack of belief in your idea to your audience. 

If your idea is well thought out, your pitch doesn't need any qualifications, you are qualified to pitch already.

So what?

To give your ideas the best chance of being sold answer the "so what"? 

It's not enough to know that 2+2 = 4, what you do with 4 provides real value to your organization.

Unfortunately for those of us trying to sell our ideas, our managers' time is short. Last year, at a presentaiton by Christensen Investor Relations in Calgary, the presenter mentioned a study showing CEOs will switch their attention every 60 seconds unless they see value in the infomation they are reviewing.

So how do you avoid being 1 (minute) and done with your manager next time you pitch an idea?

Someone, I really wish I could remember who, gave me the following system, which they called the "60 second report".

15 seconds - summarize current situation (shareholder revolt, product recall, quarterly earnings call)

30 seconds - identify 3 options for resolving current situation (the "what")

15 seconds - recommend 1 option for resolving current situation and why (the "so what")

Instead of just summarizing the current situation and staring blankly at our manager for direction, the 60 second report quickly gives our manager (who is probably dealing lots of other issues as well), some guidance on how to resolve the situation you're describing. 

As much as "Free Agent Nation" sounds exciting from an employee perspective, employers will look for their current crop of free agents to not only provide "what"s, but "so what"s to justify their investment.

Update on "what" versus "who"

Reading the excellent, "Good to Great" by Jim Collins, one of the 100 best business books of all time. 

As a previous post mentions, I feel the "what" is more important than the "who"; however, Collins talks at length about how the "who" is more important. 

Based on Collins definitions of "what" and "who", I feel the "what" is still more important as Collins talks about "getting the right people on the bus," which to me is a "what" that leads to a "who."

Thoughts?

Honestly

Our collective fear behind more personal information migrating to online databases isn't really the loss of privacy. Instead, our fear is that that information can strip away the lies we tell ourselves and expose our true selves, not to others, but to us. 

This thought slapped me across the face while reading Super Crunchers, by Ian Ayres. Ayres points out that Visa, based on purchase history, can predict with relative accuracy if a married couple will be divorced in 5 years. 

To most, this information probably carries a terrifying "big brother" connotation. On the other hand, wouldn't you want to know this information? Having watched several divorces unfold from the periphary, it seems most divorce announcements shocker the individual receiving divorce notice. What if, 5 years before you were served, you had a brief conversation with your Visa rep who adivsed you that you were on a path towards divorce? I would certainly be happy for the chance to correct the course of my marriage.

Let's leave what most consider "personal" information for a second. Anthony Bourdain writes in Kitchen Confidential about a server who showed up late for work after returning from vacation claiming that her plane was delayed. Her boss called the airline, discovered that the plane had arrived on time and promptly fired the server for lying. 

Today that server's boss wouldn't need to call, he could find arrival times on a myriad of websites.

With so much of our information available online or through easily sourced databases, our chances of getting caught in a lie are exponentially bigger than even 10 years ago. 

At the same time what are the mental and emotional costs of facing up to our true selves? To paraphrase Joe Thornley at the CPRS national conference in Halifax last June, I have one life online. 

Having one life would make it easier to be truthful. What do you think?

The “what” is more important than the “who”

In fables, animals often take place of humans. For example, the fable of the Frog in the Well teaches a lesson about being boastful.

Imagine for a second though, that you told this story to a colleague and their response was something like, “well yeah, but frog's can’t talk.” Silly response, yes? Well, here’s an example that may hit closer to home.

You’re chatting with a colleague. Your colleague says, “did you hear that Steve got our manager to increase our customer surveys from 4 to 6 this year?” Wow, big news. Your colleague got approval to increase an expense when your expenses were cut 20% and you have the increased deliverables.

Now you have two ways to react. You could focus on the who, Steve, and be jealous that he got a budget increase while you got your budget cut. You may think things like, “well Steve and our manager always go for coffee so they’re buddy-buddy, no wonder he got approval.”

Your second choice, which is vastly more productive, is to focus on the what, Steve got approval to increase customer surveys from 4 to 6. As Malcolm Gladwell laid out in his excellent new book, Outliers successful individuals don’t just happen they have help along the way. Steve didn’t magically get approval from your shared boss he had help (not the “buddy-buddy” help mentioned above).

You want to find out is what Steve did to get approval from your boss because that information will help you get approval for your next idea. Was it charts and graphs; an amazing PowerPoint; statistics that linked surveys to increased revenues? There’s one person who knows, Steve – ask him.

Yes, it might suck that you are being asked to do more with less; however, reacting emotionally only drives you farther away from your goals. By focusing on the what of your situation instead of the who you will bounce back from adversity faster and be more likely to get approval for your ideas in the future.

Closing Time

60% of all ideas fail to sell in North America because the seller fails to ask "so we're going to do business, right?" A prof at BCIT laid that stat on me almost 10 years ago and it stuck with me throughout my varying careers as journalist, marketer and salesperson.

Think of that stat like this. If 5 Honda Civics are available at a car dealership, and each is worth $20,000, 3 of those cars (and $60,000 in revenue) will not sell because the dealership's salespeople don't ask, "so when would you like to take delivery?"

Shocking, no?

Let's go away from a traditional sales situation. Imagine you are sitting across from a colleague. You are in your organization's conference room, both of you have notebooks, you have extra papers that explain the idea you want to sell to your colleague. You explain how you came up with your idea and why you feel it would be beneficial for your organization. Your colleague asks questions, you provide answers. You feel your colleague has "bought in" to your idea so you end the meeting and leave feeling satisfied. 

Now you're presenting your idea at a group meeting. Again you explain your idea and the benefits you perceive your idea will bring to your organization. Your colleagues put your idea under scrutiny so you look to your colleague mentioned above for support. To your dismay, that colleague picks your idea apart further! If you had only asked, "is this an idea you would support?" in your first meeting.

If your ideas are good enough to present, make sure you close the deal, batting .400 is only good in baseball.